Correlation Between TOTVS SA and Gafisa SA

Can any of the company-specific risk be diversified away by investing in both TOTVS SA and Gafisa SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining TOTVS SA and Gafisa SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TOTVS SA and Gafisa SA, you can compare the effects of market volatilities on TOTVS SA and Gafisa SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in TOTVS SA with a short position of Gafisa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOTVS SA and Gafisa SA.

Diversification Opportunities for TOTVS SA and Gafisa SA

-0.16

Correlation Coefficient

TOTVS SA  Gafisa SA

Good diversification

The 3 months correlation between TOTVS and Gafisa is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding TOTVS SA and Gafisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gafisa SA and TOTVS SA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on TOTVS SA are associated (or correlated) with Gafisa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gafisa SA has no effect on the direction of TOTVS SA i.e., TOTVS SA and Gafisa SA go up and down completely randomly.

Pair Corralation between TOTVS SA and Gafisa SA

Assuming the 90 days trading horizon TOTVS SA is expected to generate 0.42 times more return on investment than Gafisa SA. However, TOTVS SA is 2.38 times less risky than Gafisa SA. It trades about 0.19 of its potential returns per unit of risk. Gafisa SA is currently generating about -0.05 per unit of risk. If you would invest  2,724  in TOTVS SA on November 29, 2024 and sell it today you would earn a total of  857.00  from holding TOTVS SA or generate 31.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

TOTVS SA  vs.  Gafisa SA

TOTVS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TOTVS SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TOTVS SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gafisa SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gafisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with TOTVS SA and Gafisa SA

The main advantage of trading using opposite TOTVS SA and Gafisa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOTVS SA position performs unexpectedly, Gafisa SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Gafisa SA will offset losses from the drop in Gafisa SA's long position.

The idea behind TOTVS SA and Gafisa SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.